Occupier demand in the Big Sheds market grew over the course of 2012 with Grade A take-up twice as high in H2 compared with H1

​London, 25th February 2013 – Latest industrial research from Jones Lang LaSalle shows occupier demand in the UK big sheds industrial market grew over the course of 2012 with Grade A take-up twice as high in H2 compared with H1.

However overall take-up in 2012 was less than that recorded in 2011 due to a lower level of activity recorded in H1 2012. Overall Grade A take-up in 2012 totalled 11.9 million sq. ft. which stands at 9% lower than recorded in 2011 (13.1million sq. ft.) and is 26% lower the six-year average (2007-2012) of 16.0million sq ft.

Despite a slowdown in occupier demand in 2012, total Grade A availability fell. At the end of December this stood at 22.1million sq. ft, 15% lower than at the end of June 2012 (25.9million sq.ft.). There was 8.3 million sq. ft. of new floorspace available at this time, including 332,000 sq. ft. of space speculatively under construction (the lowest levels recorded by Jones Lang LaSalle since 2005).

Commenting, Tim Johnson – Head of Industrial and Logistics at Jones Lang LaSalle said: “The availability of immediately available new floorspace is now at its lowest level since our records began at just over 8 million sq ft UK-wide. This is 71% below its pre-recession peak of nearly 29 m sq ft in March 2008-this definitely affected take up levels last year.”

Looking at who was the most active during 2012, retailers accounted for 36% of all Grade A take-up (4.2million sq. ft.), which was 8% down in activity from 2011. Manufacturers on the other hand increased their share of take-up from 13% in 2011 to 29% (3.5million sq.ft.) in 2012.

Johnson added: “There are still a number of active requirements in the market and 2013 is getting off to a strong start with 1.4m sq ft already signed. The availability of good quality space is now a real issue and as a result occupiers are being forced to consider Build to Suit whilst there isn’t the new stock available. Developers who own sites with infrastructure and planning already in place will therefore benefit.”

There are a number of regions where available new supply is well below the recent level of take-up - including the South East and Eastern regions and the North West where we may see some speculative development later this year.

Headline rents in the big box distribution market remained largely unchanged over the course of 2012, although in general, incentive packages available to occupiers diminished.

Looking at the investment market, total activity in industrial property totalled £2.4billion in 2012 which stands at 29% lower than that recoded in 2011. Phil Marsden, Lead Industrial Investment Director at Jones Lang LaSalle commented: “"Transactions during the second half of 2011 were boosted by a number of large portfolio deals which was not repeated in 2012. There remained strong appetite for this asset class from both UK and overseas investors with most investments selling so long as the property fundamentals were good. Due the investor's popularity for logistic investments I believe 2013 should be a strong year."

Investor demand remains focused on prime stock which ticks all the boxes and in addition to this there is also interest in good secondary stock but only when in strong established distribution locations.

Prime distribution yields remained unchanged over the course of the year, standing at around 6.00% for prime stock in London and the South East and 6.75% for corresponding stock in the regions.

Commenting on the overall market as a whole, Jon Sleeman concluded: “We expect occupier activity to pick up gradually this year and, with very little new space available, we think there is a case for speculative development in select locations.”